By Anisha Sircar
(Reuters) – European shares fell on Friday, dragged by auto stocks and a general risk-off tone due to geopolitical tensions in Ukraine and the prospects of higher interest rates.
The pan-European STOXX 600 fell 1.0% and was on course for its fourth straight weekly decline.
Euro zone bond yields rose as markets continued to digest the more hawkish than expected message that emerged from the Fed policy meeting earlier this week.
With geopolitical uncertainty surrounding the Russia-Ukraine conflict also denting investor sentiment, the index is eyeing its worst month since October 2020.
“Uncertainty about whether the U.S. Federal Reserve can still steer us to a soft landing has driven market volatility to its highest level in more than a year,” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.
“But underlying economic growth is likely to stay robust in the first half… (which) favours cyclical companies and value stocks…We believe Eurozone equities, which offer undemanding valuations, will be among the main beneficiaries.”
Tech stocks hit their lowest level in nearly a year, and were tracking their worst month since 2008, as market expectations for four to five rate hikes this year are set to hurt last year’s growth stock rally.
Meanwhile, France posted its strongest growth in over five decades last year, hitting 7%, as the euro zone’s second-biggest economy bounced back from the COVID-19 crisis faster than expected, data showed.
But the German economy, Europe’s largest, contracted more than expected in the fourth quarter of last year as COVID-19 restrictions hampered activity.
Auto stocks led losses on the benchmark, with shares in Volvo falling 3.5% after the Swedish truck maker reported lower fourth-quarter core earnings and proposed a smaller-than-expected dividend.
Retail stocks was the only sector that traded in positive territory, led by Sweden’s H&M. The fashion retailer gained 5.2% after posting a bigger profit rise than expected for the September-November period.
Luxury goods maker LVMH rose 1.4% after the world’s largest luxury goods conglomerate said fourth-quarter sales growth accelerated, while Signify NV, the world’s largest lighting maker, jumped 14.6% after reporting higher quarterly earnings.
Sweden’s Electrolux fell 4.7% after saying global supply chain issues would linger, after it posted a drop in fourth-quarter profits.
Spain’s largest domestic lender Caixabank declined 2.3% after lower lending income contributed to a 52% drop in its net recurring profit in the fourth quarter.
(Reporting by Anisha Sircar and Susan Mathew in Bengaluru; Editing by Shounak Dasgupta and Shinjini Ganguli)
